How To Protect Against The Enemy From Within?

Ethics Only Go So Far

“Know Your Employee”, also known as  “KYE” is a term often used by recruitment managers and fraud prevention professionals. It is another version of “Know Your Customer” – KYC, associated with anti-money laundering compliance, but used in a different context.

Nearly 1 in 5 small businesses has suffered employee fraud at some point during their history. In some cases, the losses have been huge and caused the business to shut down. It is employees who would cause the damage because they are aware of the processes, controls and know how to bypass the controls to commit internal fraud.

I am not exaggerating when I call an employee who has not been screened before recruitment “the enemy from within” or a “time bomb”.

Of course, not all employees pose the same degree of threat to the organization or consider committing fraud in the organization . Still, one can never know when the fraud would happen by an insider – irrespective of position, age, gender, seniority or function.

Also, for those that do commit internal fraud, there are several motivating factors that make them think of committing fraud. 

A common model  brings together a number of these aspects is the Fraud Triangle. This model is built on the assumption that fraud is likely to result from a combination of three factors: motivation, opportunity, and rationalization.

The fraud triangle was first used by American sociologist Donald R. Cressey who worked in the fields of criminology and white-collar crime.

Background Check. 

Any business should protect itself against the risk of employee fraud as early as the recruitment stage. The best way is to arrange for employee background check. It is essential to find out potentially negative information. They are also used to verify prior employment and personal reputation.

The following illustration provides some suggestions for employee background check:

Remember! Make It Reasonable

Keep in mind the following tips when performing an employee background check:

• Be reasonable: Running a credit report and checking up on references makes a lot of sense, but combing court records, interviewing neighbors and requiring physicals for all of your applicants may be excessive.

• Investigations must be business-related in writing: Simply ask for the consent on a job application.

 There are simple things organizations can do to begin to protect themselves from threats from the “enemy from within”. To avoid the threat of internal fraud, effective KYC measures are accompanied by an effective KYE policy as well. Still, it is not about distrusting the employees; instead just know them well.

Now watch this video:

Prevent Employee Theft in Your Business.

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About The Author 

Hany is a senior executive and consultant leveraging 20+ years in banking, compliance, corporate and legal affairs and training together with professional certification in corporate governance and anti-money laundering. He has the expertise in providing advice to Boards of Directors; breakthrough leadership to achieve objectives and build the coalition to support different stakeholders

Hany is founder of Governance, Risk and Compliance Club (GRC Club) on linkedin with 1500 members. He is also Group Manager of Board of Directors Society - Middle East